Update on the Deflating Housing Bubble in Toronto

Home sales in the Greater Toronto Area plunged 35% in September compared to a year ago, to 6,379 homes. The plunge in volume was spread across all types of homes. Even condos got hit:

Detached houses -40.4%

Semi-detached houses -30.2%

Townhouses -34.4%

Condos -27.5%.

As total sales plunged, new listings of homes for sale rose 9% year-over-year to 16,469, according to the Toronto Real Estate Board (TREB). And the total number of active listings of homes for sale soared 69% year-over-year to 19,021.

While Toronto’s housing market is still not drowning in listings, the plunge in sales volume and the surge in listings combined is a major change in market direction. And prices have followed.

The report tried to brim with industry hope: “The improvement in listings in September compared to a year earlier suggests that home owners are anticipating an uptick in sales activity as we move through the fall,” And it grabbed at straws: “Consumer polling undertaken for TREB in the spring suggested that buying intentions over the next year remain strong.”

Alas, “in the spring” – precisely in April – Toronto’s housing bubble peaked with a final and phenomenal melt-up of home prices: The average price had soared 30% year-over-year to C$920,761! And the mood of the housing market was at its most buoyant.

So how did the plunge in volume and the surge in listings impact prices?

The average price of all homes in the Greater Toronto Area, at C$775,546 in September, is down 16% from the crazy peak in April. Year over year, the average price is now up only 2.6%.

That’s a lot of backpedaling from a 30% year-over-year increase in April. To cool the housing market euphoria – and the risk it poses to lenders and homeowners – and to put a lid on ballooning affordability issues, the Ontario government introduced a laundry list of measures on April 20, including a 15% transfer tax on nonresident foreign speculators. That appears to have done the trick.

What has gotten hit the hardest is the most expensive segment: The market for detached houses. As sales volume plunged 40% in September, the average price plunged 16% from the April peak to C$1.015 million, which is still very high and still makes Toronto one of the most inflated housing bubbles in the world, but it’s now flat year-over-year – after having been up 33.4% year-over-year in April.

On the other end of the spectrum, the average condo price in September edged down only 2.1% from its peak in May to C$520,411 and is still up 23% year-over-year.

After the surge in the first seven months of the 12-month period, the growth in average prices by segment still looks mostly positive, but a lot less positive than just a few months ago:

Detached: 0%

Semi-detached: 7.4%

Townhouse: 7.1%

Condo: 23.2%

The TREB’s special concoction, the “benchmark price,” fell 0.6% in September from the prior month and is now down 8% since May, but is still up 12% year over year.

The TREB refuses to publish median selling prices. Median price means half sell for more, half sell for less. It’s one of the standard measures in the US housing market. But the TREB, which has the data, doesn’t want this measure to circulate.

Canadian real estate site Zolo, however, publishes the median price for the Greater Toronto Area, and it’s down 17% from the April peak of C$800,000 to C$665,000 in September.

That sales and prices of detached houses – the most expensive segment – have been hit the hardest so far doesn’t necessarily mean that high-income Canadians who can afford to buy these homes have suddenly run into a rough spot. It’s more likely a consequence of the policies by Ontario, announced on April 20, that attempt to tamp down on wild speculation, particularly on speculation by nonresident foreign investors, which in Toronto is largely Chinese money.

The flow of Chinese money may have also come under pressure in China as Chinese authorities are trying to crack down on capital flight. Those two policy initiatives in Ontario and China combined could now be exacting their pound of flesh.

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73 comments for “Update on the Deflating Housing Bubble in Toronto”

Gershon

Oct 5, 2017 at 9:38 am

Oh dear. But my realtor assured me that housing only goes up, and I should buy now or be priced out forever.

Blast from the past: the most unintentionally honest realtor commercial ever, the infamous 2007 Century 21 “The Debate” wherein a pen-pecked husband gets brow-beaten by his wife, with her galactic sense of entitlement, into buying a house he probably can’t afford at the peak of Housing Bubble 1.0. Of course his wife has convinced herself that Suzanne, their realtor, has their best interest and her fiduciary duty at heart, and her “research” is free of conflicts of interest. Needless to say, this hapless couple are doomed to become cautionary tales when the housing bubble bursts.

“This listing is special John–you guys can do this!” SUCKER…
Yes, we are back to the housing bubble 2.0 and even though everyone sees it, they still want in. This should tell you just how stupid people in the West have become. I learned my lesson–don’t EVER listen to a realtor. That future garage will end up becoming a party room for your oldest offspring.

Mike G

Oct 5, 2017 at 9:51 pm

“Suzanne researched this”. I remember that appalling ad so well.
They should have followed it up a couple of years later with “The Divorce” where they’re trying desperately to unload the house at $200k less than they paid before it gets foreclosed.

interesting

Oct 6, 2017 at 3:34 am

the video never gets old

Pavel

Oct 6, 2017 at 6:12 am

Gershon, kudos for posting that golden oldie. Even without clicking the Youtube link I can recall that infamous line.

Amazing — as Wolf and others constantly remind us — how little people learned from Housing Bubble 1.0.

I was in Toronto a couple of years ago for the first time and was shocked. The downtown was a mess of condo construction, the skyline had been ruined, and a massive shopping centre was next to the old Trinity church (home of the Cowboy Junkies sublime “Trinity Sessions” album). Sigh…

Smingles

Oct 9, 2017 at 2:37 pm

“Amazing — as Wolf and others constantly remind us — how little people learned from Housing Bubble 1.0.”

They never learn. And “Housing Bubble 1.0” was really probably something like Housing Bubble 5.0, or at least that’s what it seems like. A lot of the country, at different times and for different reasons, experienced their own regional housing bubbles between the 70s and 90s.

Housing bubbles are extra fascinating (and sad) because of the human element. It may not make rational sense to us, but I totally understand the 30 or 35 year old with a budding family who wants to own a house, even if prices are fundamentally detached from reality.

intosh

Oct 9, 2017 at 3:48 pm

Always listen to your realtor. Then, do the opposite with as much conviction as the realtor’s insistence.

Some Guy

Oct 5, 2017 at 9:40 am

I don’t think it is helpful to report on changes in average price, since this reflects changes in the mix of sales (even within a segment, such as detached) more than change in price for a given property.

So far, Toronto is following the same script as Vancouver, with an initial plunge in activity at the high end of the market. Vancouver followed that with strong markets at the bottom end, and now prices are again generally increasing across the board in all segments and the market remains strong, but who knows if Toronto will follow the same path.

When Vancouver bounced back from the 15% tax, that was before the central bank started raising rates.

kam

Oct 5, 2017 at 10:43 am

Visit Vancouver, the second most spoken language is Chinese (Cantonese or Mandarin). Many do not speak any English. And you would be forgiven to think you mistakenly arrived in Hong Kong.

Vancouver real estate is totally priced out for locals -many long time Canadian citizens of Chinese decent also can’t afford to compete with foreign money.

I went to visit my son in Vancouver, where a million bucks buys you a house that is one step up from a crack shack. Welcome to the Globalist World where locals are forced out of their homes.

Nicko2

Oct 5, 2017 at 11:12 am

Vancouver has always been expensive and Canada is a large country, plenty of other cities to live in. Also note, the majority of home owners who have benefited from these price rises are….other Canadians!

intosh

Oct 9, 2017 at 4:03 pm

”Vancouver has always been expensive”

No, it wasn’t.

“Canada is a large country, plenty of other cities to live in.”

So is China or planet Earth for that matter. Ridiculous and childish argument. If “plenty of cities” was true, then why did the money largely just went to Vancouver?

“majority of home owners who have benefited from these price rises are….other Canadians!”

Any sources? Is that why Canadians are more in debt than ever?

TJ Martin

Oct 5, 2017 at 1:33 pm

” Visit Vancouver, the second most spoken language is Chinese (Cantonese or Mandarin). Many do not speak any English. And you would be forgiven to think you mistakenly arrived in Hong Kong ”

And sadly its been that way since the late 80’s early 90’s . But get your facts straight please … thats all due to the UK handing Hong Kong back over to the Chinese back in 1997 with hordes of Chinese under the rules of British Overseas Territories flocking to Vancouver ( Canada and Vancouver BC still being part of the British Common wealth therefore by law welcoming one and all wishing to leave Hong Kong before the hand over ) with now extended family members being ‘ welcomed ‘ … not due to any conspiracies , globalists or people forced to leave their homes .

e.g. Read the history / immigration policies before jumping on the conspiracy bandwagon and then place the blame firmly where it belongs … on the shoulders ( and laws ) of the once British Empire now the Common Wealth and Overseas Territories

Those who speak Mandarin — one of the two languages that Kam mentioned — are from Mainland China, not HK.

kam

Oct 5, 2017 at 6:05 pm

T.J. Martin
If your “Hong Kong Chinese’ had priority to Canadian citizenship argument held any water, then Vancouver would have long ago been inundated with Chinese immigrants. Hong Kong was held by Britain for well over 100 years.

As for Vancouver “always being” expensive, that is a relative concept. In the past couple of decades the crowding out of locals with foreign money has priced the bulk of Vancouverites out of owning a home paid for with Vancouver incomes.

Vancouver condos bounced back because the BC government decided to use taxpayer money to lend for free to first-time buyers for down-payments. Detached houses, which are too expensive to qualify for this free down-payment loan from the taxpayer, weren’t so lucky, and there was no bounce-back.

Funny how little details like that are so easily forgotten.

kam

Oct 5, 2017 at 6:08 pm

The previous government was helping their cronies in the development business, who were their largest political donors.

Another clear example of how to get rich using political influence.

Maximus Minimus

Oct 5, 2017 at 9:18 pm

That government was booted out, and hopefully soon this program (which was just a pre-election ploy), too.

Some Guy

Oct 5, 2017 at 11:58 pm

Not forgotten (by me anyway) but left out since I was trying to be concise and I don’t think that the first time buyer rule change is a huge factor (yes, a factor, but not a big one – to date the government down payment assistance totals $16.5mn – that doesn’t go far in the Vancouver housing market) – the big thing driving the upsurge in the condo sector is a surge in rents as the local economy is quite strong at the moment (in part because the number of condos under construction is off the charts!) and a ton of people came [back] from Alberta with the oil price slowdown.

We may get a further test of the impact of the program if/when the new government kills the down payment program.

But regardless, these are just details, the key thing to watch is interest rates. The big danger I see is if the economy stays strong through 2018, the central bank will keep raising rates, then if oil prices start rising in 2019 (due to accumulated lack of investment in new supply combined with rising demand) this will fool the central bankers into thinking inflation is coming back and rates will rise further and the combination of rising oil prices and rising rates will do Canada (or at least Toronto/Vancouver) in, just like what happened to the U.S. in last decade.

Maximus Minimus

Oct 6, 2017 at 11:08 am

As long as central bankers have their blinkers firmly fixed on manufactured consumer inflation (CPI), interest rate will never rise. CPI would only rise if China allowed it’s currency to float, but then the offshore money would buy a lot more in Vancouver. Spot on that housing is now THE economy.

Memento mori

Oct 5, 2017 at 9:59 am

Chinese money influx is so strong in Canada that could last for another 10 to 15 years easy. And if trouble start brewing in China one can expect that influx to become even stronger.
It baffles me that people would pay so much to live in Toronto, it is a terrible place to be . Vancouver is beautiful when is not raining (which is for 9 months of the year) and could make the case that is landlocked, but Toronto? Give me a break , it better start building those shoe boxes and keep selling to Chinese as much as they can draining their excess USD , this is an excellent niche for Canada, keep building, and build crappy cheap , only that might bring the prices down.

Singaporan

Oct 5, 2017 at 3:23 pm

If you’re talking about GTA, there are no chinese buyers here. And yes prices are diving and the for sale signs are everywhere.

Sir Stressalot

Oct 7, 2017 at 12:47 pm

??? I can’t throw a brick out of my condo window in Richmond Hill without hitting a Chinese. Last time I checked I was in the GTA.

Dave

Oct 5, 2017 at 4:48 pm

Here’s the answer to “It baffles me that people would pay so much to live in Toronto, it is a terrible place to be .”

1) More jobs here than in other Canadian cities.

2) Young people that live further away and even in the GTA get room mates and live in Toronto because there are jobs. Patricularly if you have good skills.

3) There’s lots to do in Toronto.

4) One of the best large cities (clean, safe,jobs, entertainment,…) in North, Central and South America.

It depends on your taste and lifestyle. Some people (especially younger ones) like to live in densely populated areas with lots of conveniences (lots of restos and stores and places to hang out) and with a “tourist-y vibe” (e.g. love to line up for anything). Some other people prefer more space and more quiet athmosphere.

For the consumption oriented people, those big metropolises are perfect.

Some Guy

Oct 6, 2017 at 12:10 am

Vancouver really is land-locked, google up a map of the ALR (agricultural land reserve – which you can’t build on) and see what’s left – nothing within 30km of downtown, and even after that, not much.

Also, it only rains 7 months of the year: Oct – Apr.

But you’re right, it’s a good gig, building shoeboxes for the money hoarders of the world – if only there was a way to fully isolate the ‘shoebox for hoarders’ market from the ‘housing for locals’ market. We do a better job of this separation in the post secondary education industry.

Gershon

Oct 5, 2017 at 10:17 am

Real inflation is much higher than our Soviet-style CPI statistics indicate, and is going to put a murderous squeeze on people who are already financially overstretched to pay for their grotesquely overpriced housing and rents. Heckova job, central bankers.

Silicon Valley is still going gangbuster – in core Santa Clara county and adjacent south Alameda county. In Fremont, passable houses are about 1 MILLION. And these are not mansions but formerly blue collar neighborhoods with mild renovations.

I asked my realtor (Redfin) about the ratio of cash buyers and he said it is less than 10%. Most are urban professionals busting themselves to put a roof over their head.

I think the Chinese have long gone from the bay area market.

But SF Bay (core silicon valley at least) is not stalling. Not even in the Fall – supposedly slow season.

If you don’t believe me – please see Redfin for recently sold and listed houses.

Rates

Oct 5, 2017 at 12:49 pm

Yeah also the tech job market is still going very strong. Yours truly have been getting quite a HUGE increase in people reaching out through LinkedIn, etc.

This bubble needs to burst.

R2D2

Oct 6, 2017 at 9:54 am

No, the job market is not going very strong. The only thing going strong is activity and passing jobs between Indians themselves which is to be expected since the job market for them is a meat market. Getting approached on LinkedIn is not an indication of how strong job market is.

I have the type of resume that gets me interviews at Google, Amazon, Netflix, Cisco, Apple, various banks, and even I have problem with changing jobs. I just imagine those poor soles who want to have a life, and perhaps a wife and can’t put 24/7 into learning like I do. Can you imagine those poor suckers needing to change jobs?

Strong job market was dot-com bubble 1.0 when I was getting hired left and right with high salary despite the fact that my knowledge and programming skills were so limited back then. The strong job market now is only on paper.

Harambe

Oct 6, 2017 at 11:35 am

Ain’t it the truth, brother. I see the exact same thing in R&D. My inbox is full of headhunters looking for folks with 10 years experience in tech that didn’t exist 10 years ago. Then they just hire a Chinese guy for 1/3 the salary anyway…

R2D2

Oct 6, 2017 at 12:15 pm

Yes and Google, Facebook, etc. keep paying reporters to keep reporting that newly graduates are being hired at $200K/year. I like to see how many new grads have been hired at these salaries that these companies keep reporting.

99% of new grads are a bunch of idiots just like I was in 2000; just coming out of college; and you are telling me companies which have such difficult interviews are hiring total idiots at $200K or even $100K per year? But one thing, anytime that the decision maker is not Indian, I easily pass interviews.

I’m not sure, it could be just the companies that have been working for, but in these companies, at least you see only a few Chinese; in most cases, it’s just a sea of nothing but Indians.

Harambe

Oct 6, 2017 at 2:13 pm

I’m in biotech, where they seem to favor Chinese H1b’s for whatever reason.

R2D2

Oct 6, 2017 at 7:01 pm

Harambe: Great; one section of high tech is all Indian H1-B, the other is all Chinese H1-B.

I guess, we just have to pack up and go home; hey wait, we are home. Too bad for us!

intosh

Oct 9, 2017 at 4:33 pm

R2D2, it reminds me of a similar scheme in my country from the big accounting firms a few years ago. There was a huge ad and marketing compaign to attract the young to accounting programs and careers. They were drilling down into people minds with ridiculous promises of six figures salaries. Reality of course is that most graduates worked like a dog in those Big Four firms, with a lousy salary. Only a few superstars attained six figures annual paycheck.

Jon

Oct 5, 2017 at 12:54 pm

SV won’t stall as long as we have cheap money circulating..
Usually falling transaction volume then increasing inventory is precursor to falling prices…it’s a long drawn process which may takes years to unfold

michael

Oct 5, 2017 at 1:46 pm

While it is true that homes are still selling at rather silly prices. However, it is also true (as Wolf has indicated) that some houses are not selling and being pulled off the market as well as there are significant reductions in some properties asking prices. Non of those details are showing up in Redfin, Movoto or Zillow either. Why not? Because it does not fit their narrative.

There are always buyers at the top of the market. The top of the market begins when there are fewer and fewer qualified buyer. Thats when lending standards get reduced to wring out the last few enthusiasts.

In any trajectory there is always a a vertical and horizontal component. A stall occurs when vertical velocity equals zero. We have not reached that point yet, but it is coming. Timing is always a fool’s errand to predict.

R2D2

Oct 6, 2017 at 9:57 am

I don’t trust Redfin, Movoto or Zillow at all; in my view taking their stats and numbers is like getting advice from a realtor on buying properties.

truth always

Oct 5, 2017 at 1:22 pm

The thing that I fail to comprehend is the following:
1. Most of the people buying the houses in Silicon Valley right now are not the top end creme-de-la-creme
2. Almost all of them will need to have two income households for the next 30 or so years
3. Do all of these people firmly believe that they will be able to keep their jobs at similar or higher levels for the next 30 Years?
4. I personally believe that while Silicon Valley will not become digital Detroit, A term I borrow from Alex in San Jose; there is no reason to assume that all future Innovation and groundbreaking technologies will come only or mostly from Silicon Valley. Which means that a lot of this will come from overseas. which also means the dead will be Mass casualties in the employment sector similar to what machine in Detroit and what was seen in the hardware industry in Silicon Valley a couple of decades ago. As China, India and other countries start to innovate and no matter how bad the Democratic principles are then why wouldn’t there is barely on a financial perspective people in the Silicon Valley a lot of them will be ending up holding the bag.

Is this a crazy thought?

5. For what it is worth, I hadn’t bought a house a few years ago for personal reasons and then precipitated by blocks like this and others I had come to believe that the bubble is going to crash tomorrow. And I’m still waiting for Godot. So it is not a question of Wishful thinking or Rotten Tomatoes but I generally do not see any groundbreaking innovation in Silicon Valley. All I see it’s b******* masqueraded as innovation which Wall Street pawns off to Mom and Dads around the country but not a lot of good comes from it in improving The Human Condition.

Again the question is is this really a fantasy world at least in Silicon Valley? Purely from rational thought it appears so and I’m willing to be contradicted.

Outside of the central Bankers tightening liquidity what really would prick the bubble to deflate.

IdahoPotato

Oct 5, 2017 at 2:43 pm

A new tech company in Idaho wants to poach some hardware engineers from Silicon Valley. They wanted to know if they would move to Boise or SLC. Those guys said “call us when you are ready, we want to get out of here.” This was just last week.

There are many people ready to get out of there a.s.a.p. ‘cos the cost of living is unsustainable.

Wilbur58

Oct 5, 2017 at 5:34 pm

Idaho,

I’m in SoCal and if the right job opportunity presented itself, I’d be outta here in a flash. Boise, KC, Dallas, NC, SC, wherever.

IdahoPotato

Oct 5, 2017 at 6:17 pm

If you are in the data analytics field, Boise has a lot going on. Hardware, not so much, though it may change Emerspn Electric recently bought local company PakSense.

728huey

Oct 5, 2017 at 4:34 pm

There is some innovation going on in Silicon Valley, but very little of it is truly groundbreaking or platform building like Apple was in Steve Jobs’ day, Google, Facebook, or Amazon (technically not in Silicon Valley, but the same idea). There are some great apps like Twitter, Instagram, and Snapchat, but they’re more digital lifestyle accessories and not true business models. And the stuff like Uber and Task Rabbit are a bunch of unicorns that VC’s and Wall Street have bid up to ridiculous levels of asset valuation that the companies cannot even hope to reach at this point.

Beard681

Oct 20, 2017 at 8:10 am

What drives a lot of the price crazyness is the fear of immigrants who will pay any price to stay in their own communities, or at least in areas perceived to be tolerant. I see it in Asians working in Silicon Valley and other immigrants in NYC. (I am an engineer – ALL our recent hires are immigrants.) They perceive the rest of the country as being a red-neck hellhole. When I travel to plants with some of the new guys I can tell they are uncomfortable in the restaurants and especially the bars, often the only places open late to eat in. (I had sort-of a red-neck background and am not afraid of guns, but they freak out if they travel in a rural area during deer season.)

My advise for native working people living in immigrant communities , and it is a situation I have with my mother’s house, is sell, take the money and live away from these areas where foreign money is pouring in.

We just returned from several weeks in Eagle County CO ( Vail specifically ) where other than the main village of Vail and Beaver Creek .. Denver home prices now equal or exceed those of Eagle County despite this being the high season for ski resort area real estate sales in CO .

Tell me thats not damn frightening if you happen to of purchased a home recently in Denver or were planning to do so in the near future .

There’s still people waiting for lower prices in California… Good Luck. It’s not gonna happen… I’ve been hearing that since 2014… oops.

It’s better to just move somewhere else… your job may pay you big money, but you have to buy shacks for 1 mil… or condos for 800K.

Lunacy

Jon

Oct 5, 2017 at 4:21 pm

I though the same in 2006-2007 along with many that real estate prices in CA would never go down
we all know what happened..

R2D2

Oct 6, 2017 at 10:08 am

That was the good old days when national debt was only 9 trillions. Now it is 20.24 trillion. And thanks to the government intervention the price fall was halted. This time, there will be no bail out since no one has the money. That means no one will be able to stop the free fall of the home prices.

Mark

Oct 5, 2017 at 11:45 pm

I’ve been sitting on cash, renting, waiting to buy since 2014, but I just can’t sit this out much longer waiting for a correction.

I’ve gotten downright depressed thinking about it and may just take the plunge early next year. Beginning to think that home prices will never be allowed to decline…if a correction ever got started, the public would flip out. The Fed would then drop interest rates to 0% again, Fannie & Freddie would offer 50 or 100 year mortgages, the government would step in with downpayment assistance or an ever more generous mortgage interest deduction. Absolutely anything to keep prices high by keeping payments affordable for buyers, no matter how outrageous the underlying fundamentals become.

You may never be allowed to win by betting against this market.

truth always

Oct 6, 2017 at 11:01 am

Mirror my thoughts to a T.

I have seen friends with far lower income and assets buying a house with 5% down while I was waiting for the market to correct itself.

No they are 200k richer in property while I need to spend 200k more to get a lower square footage house.

I thought they were fools in risking with 5% down and paying PMI but have come to the conclusion sadly that it was I who has who has been the fool.

I also believe that the market would never be allowed to crash and 50-60 hundred year mortgages would be offered if it was starting to crash.

The Distortion in the market by government has made saying thinking insane and insane thinking sane. Most of the participants who have made money in the property Market have gotten rich just by sheer Stroke of Luck and not genius. And those who prided themselves on logic have been proven wrong and are forced to invent a new paradigm to explain this Matrix like reality control

Kscherer

Oct 6, 2017 at 11:35 am

I’m in the same boat.

200K in cash for a downpayment. Combined income of about 200K gross. Paying 3K for a family of four for rent in Los Angeles – waiting since 2015 for prices to correct.

Feeling sick thinking about how much equity I’ve lost by not taking the plunge earlier and seeing the places in our price range – about $800K – get worse and worse.

Likely will continue to wait it out at this point but it’s not easy.

Art Vandelay

Oct 6, 2017 at 12:28 pm

Cannot use logic or assume standard market forces apply in a controlled/manipulated market.

Yes; they got lucky, but, at the same time it’s not ONLY a business decision; it is the following:

Roof over your head/shelter
Place to call home and put down roots
Place to build memories with your family and friends

You get the picture. If you find something you like and it’s affordable based on your financial situation then go for it. If the values drop you only feel it when you sell. If it’s a family forever home; then just enjoy the tax writeoff and build memories that will last the rest of your life.

Art Vandelay

Oct 6, 2017 at 12:37 pm

@Kscherer

I was in the same boat; housing bear thinking market crash coming next month, next year, etc……

Sitting in my under market rent condo saving cash and waiting for the crash UNTIL finally i had enough.

I was tired of seeing values/prices go up and losing time and building family memories in someone else’s property so i pulled the trigger.

Was looking for about 6 mos and jumped on a property. Bought a forever home that worked perfectly for our family situation and was very affordable (for my financial situation). Put 20%+ down and if it drops tomorrow, ya, i’ll kinda be bummed but at the same time I dont feel that unless I’m selling tomorrow.

Also; I cannot put a price on seeing my infant taking his first steps in MY OWN HOUSE that i bought with my own money and worked hard for, i consider it an achievement. Weekends are for playing in the yard and relaxing in my pool and having friends/family over. That to me is priceless.

Maybe if I waited another 12-36 mos that property would be 10-20% cheaper, but, that’s a big maybe and I would’ve lost so much previous time w/ my kids that it wouldn’t be worth it.

Gordon Gekko

Oct 6, 2017 at 6:58 pm

Why buy it when you can rent it for half the monthly cost? Buy later after prices crater for 75% less.

Art Vandelay

Oct 7, 2017 at 12:36 am

75%??? Ya right, that’s not happening.

That’s a silly comment

Art Vandelay

Oct 6, 2017 at 10:34 am

Not only waiting but thinking there will be a 50% drop.

Kscherer

Oct 6, 2017 at 4:49 pm

@ Art Vandelay

You are absolutely right. The problem is the houses in the $800-850 range we were eyeing a year or so ago are now out of our price range and they ones that are in it are without some key things that we desire like a pool and/or a yard to accommodate a pool. Tough to make a nearly million-dollar purchase and end up with something that’s not really what you want…

Art Vandelay

Oct 7, 2017 at 12:44 am

Ya I can understand that.

The problem is there are thousands of buyers in the same boat as you, and with limited supply, these houses (if proceed right in a good area) go into escrow like lightning.

I just don’t see it getting any better, as, the baby boomer retirement/liquidation never materialized. Boomers have low balances or no mortgage, and are sitting on 750k to 1mil in equity with no where to go. I think they will continue living in those houses into they die, and with the life expectancy in the US you could be waiting another 15 yrs for the right house to come on the market.

We love in an extremely competitive and globalistic world these days, where 10 foreigners are ready to buy that house ahead of you, and with a fed controlled economy, are you willing to wait another decade?

Just a couple thoughts.

PS don’t listen to anyone that things prices will drop 75%

c_heale

Oct 7, 2017 at 5:36 pm

I think the problem lies in the word ‘desire’. Perhaps it’s best to think about what you really need, not what you desire. You can’t have everything.

Gordon Gekko

Oct 8, 2017 at 6:09 pm

A 50% decline doesn’t come close to reversion to the mean. A revert it will in a very big way. It’s the way the world works.

srv

Oct 5, 2017 at 2:57 pm

Another thing (there are many) going unreported are the number of R/E deals falling apart, with people just walking away rather than take possession of a home now worth $200K less.
A local broker with many years in the business said he had a dozen in the works… while only ever having 5 in all his years in the business.
The TREB is as sleazy as it gets… and are personally responsible for much of the bubble… their plotting nefarious ways to increase prices never ends (like blind auctions with buy/sell agents colluding to get offers $100Ks over ask).

raxadian

Oct 5, 2017 at 9:18 pm

So, how long until houses in Toronto are affordable?

memento mori

Oct 5, 2017 at 10:29 pm

I think nobody knows. My guess would be that we are living in interesting times. CB have been printing trillions of fiat currency and we know from Friedman that inflation is always a monetary phenomenon. No other law in economics has been better established than this one. So that money will eventually find its way into the economy in ways that not one in million people can recognise to paraphrase Keynes. Our time is particular because never in history have we been in a situation where fiat printing is bound by nothing but the morals and will of unelected central bankers. There is no limit or theoretical restraint to how much they can print. They could own the world. I suspect people are starting to recognize this and where better place to put your money than real estate right now. You have an asset that will protect you from inflation and at the same time generate some rental income. If I had 1million dollars I would do the same. I dont thinik real estate prices will come significanty down, rather I see prices of evth else catching up with real estate. But who am I to predict the future?

MC

Oct 6, 2017 at 1:26 am

If you are a Chinese millionaire who piled into Bitcoin they are already.
I can introduce you to a friend who sells to mates… ;-)

The price of Bitcoin isn’t high enough yet for the Chinese to pile into it. Presently the Japanese are the biggest percentage owners. The Chinese will pile in when Bitcoin hits either the $10,000 mark or the $25,000 mark.

Just follow the price trend in Richmond Hill. From what I see it could be about 25 years before housing in Toronto and Vancouver ends up like Germany and Japan with negative interest rates in Canada forever and falling housing prices as interest rates (negative outwards to 5 years) don’t matter anymore.

Bucks

Oct 6, 2017 at 1:03 am

Context here… 14 yrs ago when I moved to Vancouver from Saskatoon, a decent detached house was aprox 3 times more in Vancouver ….today maybe 4 times more…. so either one is over or under valued, or a million buck just aint what it use to be

Bucks, you said, “…or a million buck just aint what it use to be” and you totally nailed it. It’s called asset price inflation. The house is still the same, just a little older and more run-down, but now it takes twice as many dollars to buy it. The dollar is losing its purchasing power to buy assets. That’s all it is.

Canadians have been in denial about the economic stagnation over the last 3 years, it’s not a recession just a slow down… wtf

MP

Oct 7, 2017 at 12:54 am

The marginal buyer in Canada is Chinese. Income/affordability is irrelevant. Why are non-citizens allowed to buy Canadian real estate?

SimplyPut7

Oct 8, 2017 at 6:35 am

The speculators are gone, our tax revenue agency (CRA) is starting to go after a lot of flippers, so they are in hiding, buyers realize there are lots of choices and prices keep falling so there’s no need to hurry to buy a home now, while interest rates are rising, and homeowners still have access to lots of money on those large lines of credit and are not in a hurry to reduce their house price to sell quickly before the next rate hike or the new OSFI rules (B-20) come in.

There’s a new weird thing happening: I can rent a house for the same price or cheaper than a condo. Rent for condos is now $1,400 for 400 sq ft to $2,999 for two or three bedroom units in nicer areas of Toronto. However, if I am willing to go closer to the edge of town, or in an adjacent city at the border of Toronto, I get an entire house for the same price. I’m looking at one now on Zolo that wants $1,300 for the entire house (3 bed 2 bath).

I think it’s just a new phase in our housing market where nothing makes sense anymore. Real estate agents seem sad right now, they haven’t figured out what they will do if real estate doesn’t come back, they and the speculators bought a lot of property that requires home values to go back up to the insane values of March/April 2017 for their flips to be profitable. It’s only a matter of time before the banks/private lenders who gave them the money for these flips realize they can’t sell them or sell at a price to pay off the debt and ask for their money back.

We also have lots of homes (hundreds if not thousands) for sale over $1 million that are vacant, and if these homes can’t sell, they only want $1,800 – $3,000 for rent. The mortgage calculator on ratehub.ca shows that if these homes were not bought with cash, that the mortgage would be $4,000 or more for these homes, which means the owners are willing to lose $30,000 a year or more to hold on to the home in hopes that interest rates don’t go up anymore and the new OSFI rule B-20 won’t kill the high-end housing market?

Last, foreclosures have started to go up again (not by much, but it’s a start). banks, real estate brokers, and the online homes for sale sites don’t say which homes are foreclosures. The only way to tell if the home is a bank sale is by looking online is to read the description and look at the pictures to see if there are signs no one is living in that home anymore.

The big banks in Canada still think rates will go up four more times (up 1%) in the next 18 months. That should encourage people on variable rates to go into fixed-rate mortgages and stop holding their breath that their mortgage costs may go down if rates are cut again.